Welcome back to Count Me In,

IMA's podcast about all things affecting
the accounting and finance world.

This is your host, Adam Larson,

and I'm here to introduce you to our panel
of speakers who joined our podcast to

talk about sustainable business and
sustainable business information.

Shari Littan,

IMA's Director of Corporate Reporting
Research and Thought Leadership

moderated the discussion between
Dawn Emling and Tjeerd Krumpelman.

Dawn is the head of sustainability
initiatives for Lincoln Financial Group.

And Tjeerd is the global head of advisory
reporting and engagement as well as

group sustainability at ABN
AMRO Bank N.V. Together,

the three of them discuss the purpose
and value of sustainable business

activities,

the impact of reporting and how to
overcome potential challenges relating to

technology and streamlining processes
relating to sustainable business.

Keep listening as we head
over to the conversation now.

So many of the professionals who
now find themselves working in the

area of sustainable business
came from other backgrounds,

other disciplines. The
younger professionals, yes,

they are finding a way to
this area directly from

their education.

And they can go directly into sustainable
business or corporate responsibility

teams or whatever companies are
calling it. But for the rest of us,

we all came from somewhere else
because the field is essentially

emerging and new.

So I'm gonna ask Dawn and
than Tjeerd to let us know,

where did you come from before you
got involved in sustainability?

What's your basic background?

Yeah. Thanks Sherry. I

agree with you that most people now
are coming from different disciplines.

I actually started out in the U.S.
government and state department doing

human rights work, that
also included, a number of,

kind of nonprofit roles.

And then I was an early
practitioner with Credit

Suisse, in Asia and then
EMIA on sustainability,

the first sustainability kind of head
for each of those regions so setting

that up and then fast forward,

I worked at Thompson Reuters
on sustainability of global

sustainability.

And then eventually now I am with
Lincoln Financial heading up their,

sustainability initiatives. So yeah,
kind of a long and windy road here.

Yeah. And for, for me, it's been,
it's been a little less windy, because

I have always worked in banking.

But I worked in the private bank
first with clients and then in our

investment bank and our retail bank,

but always with clients and always
on the more commercial side of

the bank. And in my recollection,

I think sustainability in some sort of,

some form has always been part of
our conversations with clients, but,

but it was like eight years ago when I
moved into the group sustainability or

group strategy and sustainability team,
for the first time that it became,

let's say a regular job.
And back in that day,

or in that time, it wasn't
considered a promotion, right.

It wasn't considered to be very fancy
to move from the commercial side of the

bank in a managerial role to a,

let's say a cost center
like sustainability.

So it has evolved a over the years,

to becoming quite a popular
destination, for people to work,

nice place to work with lots of applicants
whenever we have a role available.

That's interesting to see, but yeah,

I came from the commercial
side of the bank.

So that's quite a bit of difference:

diversity in both of your
backgrounds and how you both come and

arrive in almost similar roles.

So I think that says a
lot about the type of work

and the almost entrepreneurial
mindset of many of the people

that you've found or have found
in the sustainable business arena.

Now,

one thing that we are hearing
over and over again is that much

of the work behind the company
inside the company, let me say,

internally is crossdisciplinary
- that there are people coming

from different parts of an
organization to work together on

sustainable business matters. However,

when the finance and accounting
function get involved and

they bring their skillset,

it creates set of
capabilities and skills to the

work that's going on. And
it's incredibly valuable.

So if I can hear from both of you,

what your experiences
are in engaging the--

we'll call them management accountants
or accounting and finance function

members.

Happy to start to kick
this one off. I mean,

we need everybody in the sustainability
space, right? So we need,

so I'm in banking and we need everybody
across the bank in all different types

to step up from their own skillset.

So to embed sustainability
into their day to day role. So,

facility management takes responsibility
for the sustainability of our

buildings, right? So,
and of the workplace,

HR needs to think of travel policies,

Risk needs to think of sustainability,
embedding into risk policies.

And where does controlling and accounting,

come into place in measuring, in reporting
in disclosing all sustainability.

That's where we need the talent and the
skill sets of financial professionals

and accountants

and management accountants. And I think
they are relatively late to the party,

but they are most welcome. And we need
them there in the reporting space,

in the disclosure space, in,
getting the right quality of data,

getting this into the dashboarding,
into the steering of companies.

That's where we need
management accounting.

But actually I think we need
everybody so I can think of,

I can think of a role for IT.
I can think of a role for HR,

for risk finance, strategy
people. We need all of them.

And in that sense, we definitely
need management accountants as well.

I would a hundred percent underscore
that this is an enterprise-wide

effort.

We group our kind of work
into 16 or 17 business lines

and the E, the S, and the G cross,
many of them across all of them.

I would also just add that we've seen,

this is a very evolving landscape.

So in the last six to 12 months,
for example, we are now focusing on,

or we're being, you
know, asked to focus on,

or we're being pressured to focus on kind
of new areas that we didn't six to 12

months ago. And I'll bring out, you
know, human capital development,

human capital management. During COVID,

it was kind of a brand new issue
for us to look at under the ESG

umbrella or rubric.

There's been a lot of focus on strategy
in the last 12 to 18 months with

TCFD pushing on strategy and governance.

So because it's such an evolving space,

you really do need senior
management across the business

units, and that helps
you with, in my opinion,

it helps you getting acceptance,
across the enterprise.

If senior management in every line of
business is pushing this, then you,

you can get enterprise-wide acceptance.

You can stay ahead of the
evolution because you can
say, "Hey, Human Resources,

I'm coming to you about this human capital
management issue that we're saying,

oh, yeah, we've heard about this".
And then you keep the momentum going.

So I completely agree
that all business lines

are necessary and we don't know what's
coming next. I would take a big guess,

as Tjeerd said, metrics,
reporting dashboards. I mean,

we need people with those
skills and that expertise.

Thank you both so much. As you may know,

IMA has developed a set of working
principles to help us as an

organization respond
to these global trends.

And it informs how we guide our
members with educational material,

for members in accounting and finance.

One of the most critical things
that we hear from people in your

position are the challenges
around fragmentation,

that there are too many
frameworks, too many guidelines,

too many reporting standards.

And on top of that there's market
pressure to respond to a variety

of survey instruments, both the
non-governmental as from CDP,

but also a range of
commercial survey instruments.

And for us at IMA,

one of the things that we are thinking
about and concerned about is whether all

of this additional layers of reporting is

decision useful.

So perhaps a world where there are fewer

KPIs,

but more meaningful KPIs
and reporting might be a

beneficial direction to
think about in the ecosystem.

Could you share your experiences on this?

I'll start, again,

and the next question you can start,

but I do have an opinion on
this and I feel that I know

there's a lot of talk about too
many frameworks, too many KPIs,

but actually I feel that there's a
misunderstanding of these frameworks,

that there's a lack of understanding
that people, need to study first.

What is the intention of the framework?

The intention of the framework and of
the various frameworks they differ,

they can be used for
different purposes. And yes,

we need some sort of convergence
and convergence will come. I mean,

it will come, but please
don't wait for it.

But start work now. And I think from
the management accounting perspective,

they can help to make this,
this stuff better, right?

So they can get involved and make it
better rather than stand on the sideline

and be critical. You can be
critical and join the game.

We need you there. So,

and the purpose of all these frameworks
is never to come up with KPIs,

it could never be the goal. The
goal should be to measure progress,

to disclose on progress, and ultimately
to be able to steer on progress.

And that's where maybe KPIs, can
be a meaningful contribution.

But my suggestion would be rather than to,

wait for convergence or to, well,

to take notes of the meaning behind these

frameworks and to study them and, and
then to learn from them and see where,

where you can best apply which framework,

and then to work on the improvement
and developments together with all

these sustainability folk, that I've
been working on this for so long.

You know, I'm gonna just respond to that.

Cause one of the key
capabilities that we hear about

when management accountants
get involved in the process is

connecting the information and
the request for information to

the business model and helping
to figure out which is meaningful

and which is less relevant
to a particular business.

And this is incredibly valuable
to the entire process. Dawn,

do you have a follow up?

I do. I agree with both of
you and not surprisingly,

I agree with Tjeerd that these
are decision useful. You know,

there is a huge landscape of,

let's say questions that we respond
to, both the survey instruments,

as well as, the data
providers and the frameworks.

So I think the most useful piece of that,

if you look at that landscape
and for us as an issuer,

we probably respond anywhere
from 1200 to 1500 questions every

year. So it's a massive amount
of questions and topics.

I do find them decision
useful. They guide us,

they show us what's coming around the
corner. Shout out to CDP for example,

and TCFD. They tell us, you know,
here's, what's on the horizon.

You guys should be thinking
about these topics.

So I think in and of the themselves,
they are decision useful.

I think the problem comes
and myself and my peers,

the problem comes with the
rankings based on different

weightings.

So if you have 1200 data
points that you're releasing to

the public and 10 different
ratings and rankings are using

data and putting you on a league
table and saying, "Hey, Dawn,

you're above your peers
today on this ranking,

but tomorrow you're gonna be
10 below on this ranking",

that becomes a very confusing
conversation to have with senior

management.

And when you start to talk about how
the sauces is made on each of those

rankings, people fall
asleep and rightfully so.

So I think what that means
for a practitioner in house is

that our resources are dispersed.

We spend time trying to explain them.

We spend trying to
understand our stakeholders'

favoritism, investors,
clients, senior management,

employees, activists, NGOs. I mean,

we have a ton of stakeholders and they're
all kind of focusing in on one or two

rankings. And we, the practitioners,

the CSR team inside have to spend

our time and I'll give an example.

Let's say there are three topics
this year that we have to work on.

It would be great if we
just had three topics,

my team could go out and just work
on those three topics. And, oh,

let's look at peer let's look at best
in class. Let's look at, you know,

frameworks and to improve our processes,

structures and governance
around those three topics.

But because there are so many
frameworks and so many rankings,

we're dealing with something more like
20 or 30 topics that we have to address,

and we don't have the bandwidth for that.

Tjeerd, did you have something
to follow up on Dawn's remarks?

Yeah, so I like the, the comment that
Dawn made on these rankings and ratings.

And I know, again, this is
similar to the frameworks.

There is conversions there,
or standardization is needed.

Correlation between the different ranking

is too low, on the ESG front.

But, and I'm not trying to smooth this
out, but I'm just trying to say, I mean,

from a board perspective or
senior management perspective,

it is surprising to me that they
do understand the difference

between certain credit ratings - and
there are differences between credit

ratings - but they, they seem to,

really have a strong desire to have
just one sustainability rating and

that to me, or ESG rating. And that to me,

is silly because there are so many
definitions around sustainability.

You can also see CDP is
focusing primarily on

carbon, MCI, DJI's, more
focused on the holistic ES&G

well, and there are many others,
some are funded by NGOs. So you,

if you know that they're funded by NGOs,
they will have a different perspective.

For me, as a sustainability professional,

all that information is valuable.
It's valuable information.

And I understand that I need some sort
of translation to senior management or

a board. It needs a
translation saying, okay,

why is this rating as high or low?

And what is the delta and
how do we compare to peers?

That is the translation that is needed.

But if you were to put all
these credits in front of me,

without any background
knowledge on credit ratings,

it would need a similar
translation. So from my perspective,

it is a knowledge issue
and a guidance issue.

And that is actually how I consider my
own role or my team and Dawn's role as

well within her company.

This stuff needs translation
and ideally it doesn't,

but in the real world, a lot of
this stuff needs translation.

I was just gonna follow up by
saying one of the concerns in

hearing that positive work by the various

rating companies. On the other hand,

one point to consider is
that a team like Dawn's,

an accounting and disclosure team
is a limited resource itself.

And we should think about going
towards a goal where her work is being

used to its best use and not

continually. I mean,

what we want her work and her
team to be sustainable and not

excessive.

And I think, you know,

I've been in sustainability longer
than I want to actually admit publicly,

but I think in the last
two to three years,

it has become a reporting disclosure job.

And it wasn't before.

Before it was a change management job,

it was a knowledge education transfer job.

It was bringing everybody
with you on this journey.

And now it is primarily not
just myself, but my peers.

It is an ESG disclosure job.

Well to respond to some of these
trends and these burdens one thing at

IMA that we look to is
the power of technology.

And one of the reasons I was so
excited to do this podcast with

Dawn is that she explained to
me that she and her team have

looked to technology and
have built systems to

facilitate the information
gathering and reporting,

and that there have been in
enormous benefits. So Dawn,

I'd like to hear from you about
the process that you went through,

the challenges you faced and overcame
and what our members could take away from

your experiences in
looking to the technology.

Yeah, so we were-- as many,
and as I was in a previous job,

we were responding to requests
and survey instruments,

with push and pull Excel or word
tracker, you know, changing,

changing comments. And we
decided to take the time out,

you know,

the six months to a year that it would
take to assess what we're dealing with

and look at what was available and
build out some kind of automated data

management system. We ended up going with,

ServiceNow because
Lincoln has that already.

And there's a team in house that
could customize it for us. And we,

built out what we now call
the ESG tracker. So for each,

if you know, ServiceNow, it sends
you-- it's a project management tool.

It sends you a ticket into your inbox.

You can get into the online web based
and you can mess around with a ticket.

It can have tabs with guidance.
You can customize that ticket.

We now take all 1200 to 1500
questions that come at us

and create a ticket.

That ticket then is designated for one
or up to five subject matter experts.

They get it in the first instance they
update, what they think, you know,

they've done in the last year. It
prepopulates their answer from last year.

It comes back to us for kind
of ground truth and kind of

fact checking,

provide any links that we know and
new policies that we know about.

And then that goes on to,
senior management for approval.

Once that approval is in the
system that we know we can use,

the information that's in that ticket.
And then we go ahead and upload it.

I mean, at some point this is
gonna be a direct, you know,

feed into the surveys, et cetera.

But we found that it's, it's
helpful in a lot of ways.

The SMEs are really owning it.
They know these are their tickets.

They know that was their question
from last year. They know, oh,

here's a new question, they see it
come in, they look at the deadline,

it's really smooth. We don't have to
chase anybody. The system, you know,

pings them, "Hey, you're due up".

The fascinating and next step for us is
the data analysis that goes on behind

the themes. So we can put any kind
of internal measurements on it,

a red, yellow, green light system
you're doing really well on this, or,

"Hey guys, we can pick up some points
over here". We can see, you know,

certain business lines are getting a
hundred or 200 questions like holy cow,

do you really need to see all those?

And so we're moving into
kind of second phase how we,

as the CSR team, to Tjeerd's point,

translate that into a much more user
friendly system. And we're, you know,

going offsite in December
to try to see if we can't,

take that diversion too.

The hours it has saved us is tremendous.

I think this is also a great example
of where management accountants,

financial accountants can really help
us, right? So we are, and I mean,

Dawn has done amazing work
on getting the data and,

and getting the system set up.

But this is actually day to day work for
a lot of our colleagues within finance.

They have been collecting financial
data for, well, for a long time.

They know how that works, but,

and I get the feeling sometimes that
they feel that nonfinancial data is

from a totally different planet. It's
not - it's coming from the same planet.

It needs the same checks and balances.

It can go through the same type of SAP

or whatever type of system
that a company is using.

And it really improves the quality
if it's coming through the same flow.

So we've had this traditional
sustainability reporting
and disclosure workstream

in our company and we have a
separate finance workstream.

And then once we do our reporting
or we do these benchmarks or raters,

then they come together at the final
end. They need to come together before,

they need to come together at the point
of decision making so relevant financial

and non-financial data needs to
meet before boards take decisions.

And this is, I mean,

this is where management accountants
can place such an impactful role

by taking that responsibility.

Not because regulations are forcing us,

but because they're experts
in data, and, and we are not,

we are experts on sustainability. We
have an idea on how to save the planet,

right,

but we don't have an idea on how to
measure carbon in all loans or in all

assets of the books. And right now
that is actually what we are doing.

We're coming up with carbon
accounting for the financial sector

and it's coming and it's
working reasonably well.

But whenever I talk to
a management accountant,

he's gonna pinpoint exactly where
it's failing and that is in the

data gathering, and that's why need them,
and we need to work together on this.

And I would add to that the
accounting departments, for sure,

and the risk departments. They
also manage an incredible - I mean,

obviously I'm in an insurance company,

so - but they manage an
incredible wealth of data also,

and our geniuses at it.

So if we can present our information
and the demands that we're getting

in an analytical

database presentation,

that at some point to Tjeerd's point
will like match up with theirs.

That would be the ideal
that it now it's the same

sustainability ESG data is in the risk
systems and the accounting systems.

I'm going to add to that.

We hear so much about the
movement toward getting assurance

on ESG reported information,

but in order to move to
a model that allows for

assurance, we need
better internal controls,

better governance and oversight systems.

Before we think about audit in a robust

way that we know in financial reporting.

So I'm going to ask my final question.

And a lot of what we've been talking
about is going to sound very expensive,

very costly for small to
medium size businesses.

And in fact, as we observe
the regulatory movements,

so much of it is focused on
public companies, public company

disclosure that follows
along securities, disclosure,

regulations. That seems to be the
parallel and where we're headed

in the near future,

but such a large swath of
our economy is non public.

And so my question to both
of you is how do we make

sustainable business information
and management relevant and

actionable by small and medium
size companies that are not public?

Is the driver going to come, for example,

from supply chain, selling to
large companies that are public,

or might it come through capital raising,

I'd like to hear your view
on making it relevant for

small and medium size companies.

No, I'm very happy to start
here because for me, the--

and I don't want to underestimate this
or to make this, to make light of it,

because I do understand that
there can be a cost involved.

It is time consuming. I mean,

and it is continuing all the time.

So it requires some sort of
continuous attention, right?

So I don't want to downplay that in
any way, but when does it become fun?

When does it become helpful? When
does it become useful? And that is,

if it is providing decision
useful information,

that is what you're looking for.

So if you're approaching this and
sometimes we do as a bank, right,

from a regulatory perspective, you
just need to deliver, you need to

comply, which is, well, it's fun
for some people, but not for most.

If you're approaching this from
decision usefulness from actually

improving your business, improving
your value creation, improving your,

the way that you steer your
company, no matter what size it is,

then it's gonna really,
improve your decision making.

It's gonna improve the awareness of
where you are heading with your company?

And that can be said for a very small
company and for a very large company as

well in similar ways,

but that's why one framework doesn't
work for all these companies.

You'll need to think about it. What
is the information that I need?

And it can be helpful in numerous ways.

It can be easier for you
to attract financing.

It can be cheaper for you to attract
financing. It can lower your risk base.

It can improve, customer satisfaction.
It can improve pre engagement.

It can improve the planet as a
whole, if you're into that thing,

but ultimately, it improves your decision,

making it improves your dashboarding.

That is what you want to
steer your company on?

And you're never just steering
on financials. Nobody,

I've not met a single
board member that says,

I just need an Excel sheet
with return on equity and,

and core equity tier one. And
that's how I steer the entire bank.

They always need more information.

And then the challenge becomes
which of the non-financials are

actually valuable for me to measure
progress and to steer this company,

that's the search.

And from a very practical perspective,

I think for a small business
or private business,

pick one framework or
one survey instrument and

say, because it's, it hits on the most
material issues for your business.

And then run that down for
two years and see, you know,

who did we have to talk to?

What kind of data did we have to
get that we didn't have before?

And then what did it
organically encourage us to

set as targets?

And then that's what we
prove to our company is of

value. We are setting targets,

we're setting a strategy and these
questions and this instrument,

or this framework have
given us the guardrails.

And we believe in it because it's been
road tested out in the real world by a,

you know, a thousand plus,
you know, issuing companies.

And let's go down this road.

We have faith that this instrument
or this framework is valuable.

So let's do it for two years and don't
get scared by Dawn talking about 1200 or

1500 questions like that. Doesn't
have to be your world. You know,

we're a Fortune, you know, under
200. So we have a lot of eyes on us,

but if you're a small business or
private choose one and go for it.

I'm just going to add to that. Our view,

that what it's really
about is value creation,

value preservation with a bit more
of a long term perspective than we

see in traditional financial
accounting and reporting.

And that so many of the factors
that lead to value creation,

preservation performance are
not necessarily captured.

Things like employee engagement.

We're watching a competition for
talent and we know that the younger

generations look to purpose, not
just profits. They look for both,

and we don't capture
that information in our

mainstream finance and accounting
world, but we know it creates value.

Customers that will go the extra
mile because they love our business,

that's very real to small
businesses and how they survive the

pandemic. Customers love
them and stayed with them.

Suppliers stayed with them. We're
hearing all sorts of supply chain issues.

Well, if you have a good
relationship with your suppliers,

that relationship doesn't
necessarily captured in

mainstream traditional accounting,

but we know it's creating value.

It does translate to cash
flows over the long term.

It does lower cost of
capital management oversight,

reduction of risk.

And this is why we think that
a sustainable business is good

business. So thank you both.

This has been Count Me In,

IMA's podcast providing you
with the latest perspectives
of thought leaders from

the accounting and finance profession.
If you like what you heard,

and you'd like to be counted in for
more relevant accounting and finance

education, visit IMA's
website at www.imanet.org.